This is the fourth article in a series looking at the potential cannabis market in each of the eight states that approved recreational or medical marijuana initiatives in the 2016 election. Check back each week through mid-January for new entries. Click here for previous installments.
Florida’s new medical marijuana market is poised to become one of the largest in the nation, yet a limited number of available MMJ business licenses could hinder the program’s growth.
Seventy-one percent of Florida voters last month approved Amendment 2 to legalize a much broader MMJ program in the nation’s fourth-most-populous state.
Within a few years after the program’s launch, annual sales via dispensaries in Florida could hit $600 million-$800 million, according to initial estimates by Marijuana Business Daily. The program is scheduled to roll out in 2017.
Last month’s yes vote follows a narrow loss for MMJ advocates two years earlier. It builds on an existing but program mainly limited to CBD-based medicine.
In 2014, Florida’s legislature approved a CBD bill authorizing five business licenses in the state and a limited list of qualifying medical conditions. Last spring, lawmakers authorized terminally ill patients for high-THC use. A sixth license was added.
Amendment 2 opens the possibility of many more licenses. Moreover, dispensary, cultivator and other licenses could be available separately versus the current vertically integrated model. The amendment also doesn’t include a residency restriction for businesses, making it an attractive opportunity for expansion-minded executives at cannabis companies in other states.
And Florida’s market potential could mean plenty of opportunities for ancillary businesses ranging from lighting and testing companies to legal and accounting firms.
But how long it will take for the industry to develop and meet patient demand is a big unknown. Currently, the six vertically integrated businesses must serve a state with more than 20 million people and a huge senior population.
Under existing law, three additional MMJ licenses are planned to become available when the eligible patient pool reaches 250,000. One of the three is dedicated to minority farmers.
Much also will depend on the extent to which “pain” can be treated with MMJ – a condition that can boost the patient pool and sales.
State lawmakers and the Florida Department of Health will be responsible for writing the regulations governing the market. Therefore many details aren’t yet known.
“This is a gigantic, gigantic opportunity if we do it the right way,” said Ben Pollara, executive director of United for Care and manager of the MMJ campaign. “The opportunity before us is to create the gold standard medical marijuana law.”
The big question is whether the amendment will produce more licenses for additional business owners, or will the six existing businesses try to supply everything?
Under Amendment 2, there is no limit on the number of dispensaries a license holder can own, meaning that existing licensees could open as many dispensaries and cultivation operations as they want.
“The existing dispensaries probably feel like they can meet the demand,” said Jeff Sharkey, executive director of the Medical Marijuana Business Association of Florida.
But the amendment states that Florida must have a reasonable number of “medical marijuana treatment centers,” or dispensaries, to meet patient demand.
The existing licensees are going to fight “tooth and nail to keep it to six,” Pollara said.
Local governments, meanwhile, need to determine zoning, security, location, and other regulations.
Another key concern for business owners is that smokable flower may not be allowed, according to interpretations of the amendment.
Sharkey does anticipate robust opportunities for ancillary companies, encompassing the whole range of businesses the industry has seen so far. “It’s going to be a big business,” he said.
Number, type of licenses
Sharkey has seen estimates that Florida will need up to 40 licensees, based on production capabilities and patient needs.
Under Amendment 2:
- Each licensee can cultivate anywhere they want and open as many dispensaries as they want – anywhere in the state.
- Licenses could become available for dispensaries, growers, distributors, etc. versus the existing vertically integrated model. The state must work out the details.
The state currently isn’t accepting applications. When it took applications a year and a half ago, 28 applied. Those wanting a permit will probably contend the existing six licensees aren’t enough to serve 20 million people, Sharkey said.
“These (six) licensees have been waiting to see if Amendment 2 would pass, because the patient base has been relatively small under the original legislation,” Sharkey said. “And they have a major investment.”
Conditions list, patient count
Amendment 2 offers a much broader patient base than the existing conditions list.
The new qualifying conditions include:
- Crohn’s disease
- Parkinson’s disease
- Multiple sclerosis
The amendment also gives doctors the discretion to determine whether other conditions can be treated with MMJ, which could expand the patient pool more.
Amendment 2 should also make it easier for more doctors to recommend MMJ. The legislature is expected to fix existing language stipulating that only qualified doctors, estimated at about 200, who’ve taken an eight-hour course can be certified to recommend MMJ.
According to Marijuana Business Daily estimates, the potential patient pool could total 100,000-300,000.
The ultimate number will depend on how many doctors participate and how the state and doctors ultimately handle the “pain” part of the medical conditions list.
Amendment 2 takes effect Jan. 3. It prescribes two deadlines:
- Six months after Jan. 3, the state health department must issue regulations for patient and caregiver ID cards as well as the licensing of dispensaries.
- Within nine months, the health department must begin implementing the regulations, distributing ID cards, issuing business licenses and basically allowing the MMJ system to launch.
The legislature is expected to advise the department on drafting the rules and implement components of Amendment 2.
Much will depend on how lawmakers and regulators finalize the rules governing the industry.
If the industry remains in the hands of six license holders, it will take a long time to develop adequate supply to meet the demand.
“This is all new and we’re a big state,” Sharkey said. “It’ll take some time to ramp up.”
Bart Schaneman can be reached at email@example.com